Self-employment on the rise in the Caribbean, but quality jobs remain elusive

December 13, 2013

World Bank Group

  • The Caribbean is a region of entrepreneurs, with nearly 70% of the workforce self-employed.
  • A chronic lack of innovation in the region is stifling business growth and competitivity.
  • Unemployment or a fear of redundancy was the catalyst for almost 70% of business owners becoming entrepreneurs.

Today, young Barbadian entrepreneur Justin Quinlan is the CEO of a successful start-up, but that wasn’t always the case. Encouraged to focus on an existing career path like the law or medicine, he frequently came up against obstacles to his entrepreneurial dream.

"I remember I had to pitch to one of the bigger lending firms in Barbados which was geared to finding innovation for youth. So I walk into this boardroom and everyone there is about 50 bordering on 60 plus," he describes. "When people don't understand ideas or comprehend ideas, they are afraid. Investment is all about leveraging risk so why would you try and invest in something that you don't know or understand."

Now Justin's making waves within the local digital community, but his trials to prove his innovation was worth the risk is one that many will find familiar within the Caribbean.

A massive 60% of Latin America employees work for businesses with five or fewer employees and this figure grows to almost 70% in the Caribbean. But while entrepreneurship is often considered to be a driver of development, the resulting companies grow at a much slower rate than in other middle-income regions.

What's more, the high percentage of small businesses reflects a lack of quality jobs in the region’s larger or multinational businesses.

"In the Caribbean, almost 70 percent of business owners declared having opened a business out of fear of losing their job or because jobs were not available," summarises the report.

This should ring warning bells.

Over the past ten years, Latin America and the Caribbean has benefited significantly from favourable economic tailwinds. However, as these tailwinds die, growth has to come from within, and innovation is key if the Caribbean is to build upon the social gains of recent years.

" In the Caribbean, almost 70 percent of business owners declared having opened a business out of fear of losing their job or because jobs were not available. "

Latin American Entrepreneurs: Many Firms but Little Innovation

Lack of innovation

Caribbean firms develop new products less frequently than their counterparts in other developing regions. In fact in Jamaica the rate of product development is less than half than that of Thailand or Macedonia. And while Grenada topped the region for new product development, 6 of the worst offenders also hailed from the Caribbean.

Possible reasons are four-fold:

  • Human capital: Science, technology and engineering graduates are at a premium and it’s a scarcity that has a direct effect on innovation. Closely related to the quality of education, the report recognises this will be a major challenge for the region.
  • Intellectual property: With separate laws governing copyright in every country, the complicated panorama lends less protection to the product creators, deterring much needed investment for new product research and development.
  • Risk taking: A deep cultural shame of failure is hindering innovation by dissuading entrepreneurs from taking risks. This is evident as much in individual reticence at a business level as in the low levels of investment in research and development, especially from the private sector.
  • Logistics: Modernizing ports, transport, and customs can add a competitive edge to products from the region. Currently, poor public services, communication links and transport infrastructure are hindering efforts to boost production capacity in the region.

Quality job creation

Launching the report in Miami, De la Torre proposed that size isn’t always the best marker. In fact, ‘multinational’ firms based in Caribbean are 40% less likely to introduce a new product than the same company in a high-income country and 20% less likely than the wider Latin American region.

It is more helpful to consider businesses in terms of their age.Younger firms far outshone more established ones in terms of job creation. The key is identifying and supporting those startups which have the most potential through start up programmes, subsidies or policy.

"I think everyone has identified that innovation is definitely the way to move forward. Now, how to take this concept of innovation, break it down into microlearning moments so they can move this innovation train forward," said Patricia Ferreira from getAbstract, a company who provide training to those looking to start their own business.

Entrepreneurs are key actors in turning low productivity around to create lasting economic benefit and quality jobs. Nonetheless, the vast majority (some 70%) of business owners across the Caribbean work alone. Consequently, the report recommends establishing an economic environment which enables them to innovate and compete in order to increase productivity and enable them to grow into quality employers.